Exploring the Manufacturing Reshoring Decision-Making Process Using System Dynamics

Abstract

Reshoring manufacturing is a strategic decision because of its cost, implications, and complexity. Existing models have largely focused on cost aspects in reshoring decisions and are considered limited in assisting practitioners in the reshoring decision-making process. Variables like cost and quality have been the most important, whereas environment and sustainability seem not a priority, arguing for the myopic nature of these decisions. Therefore, this study employs system dynamics (SD) to expand practitioners’ mental models for the reshoring decision-making process. To do so, first, variables and heuristics are retrieved from the literature. Next, an industry expert is interviewed to have a practitioner’s input. Finally, a descriptive SD model is built by connecting variables and heuristics. The findings indicate that the behavior of the variables in reshoring decisions is dynamic over time. Furthermore, the variables are inter-linked, resulting in non-linear, multi-caused reshoring decisions. The presented SD model allows incorporating the variables that are sometimes difficult to quantify and provides a holistic view of the variables, their relationships, complexities, and the dynamics involved in the reshoring decision-making process. This study contributes to reshoring literature by using SD perspective in the reshoring decision-making process and proposing an SD model for reshoring decision-making. This study assists practitioners in expanding their mental models regarding the reshoring decision-making process. It is further argued that the proposed SD model may work as a generic steppingstone to further develop company-specific feedback-oriented models to support in their reshoring decision-making processes and to support future research on the topic.

Manufacturing Relocation Ambiguity Model: A Prerequisite for Knowledge Management

“…Previous research has treated offshoring and reshoring as separate research spheres around which detached bodies of literature are being developed. More attention is needed on why offshoring and reshoring take place simultaneously, and how decisions are made (Gray et al, 2013;Pérez et al, 2022). Nevertheless, little research has been conducted so far to capture the dynamic interdependence between offshoring and reshoring (cf.…”